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You CAN Increase Cash Flow

Can Thinking Like A CEO Save You Money?

If you’ve ever gotten to the end of the month and wondered where all your money went, you’re not alone. Far too many of us live paycheck to paycheck, confused and confounded about how we could ever finally, really feel more financially stable.

If this sounds familiar, it might be time to think like a CEO and start increasing your cash flow to decrease your financial stress level.

Control your outflow

Just as company executives contract and expand outlays to fit the company’s business cycle, so should you.

Take your savings rate. Conventional wisdom suggests you should save a steady 10% or so a year for retirement throughout your career. Instead, says Maspeth, N.Y., financial planner Michael Terry, you’re better off adjusting that rate to fit your financial situation—pulling back to, maybe, 5%, when your kids are in college and the budget is tight, then ramping up to 10% to 15% after they graduate. Once your mortgage is paid off, Terry says, boost your rate again, say, to 25%.

Odds are good that you’ll come out ahead with less pain. Take a typical 50-year-old who earns $70,000 a year, saves at a steady 10% clip, and has $350,000 socked away in his 401(k)—the target for that age. Assuming standard 2% raises and average annual returns of 5%, he’ll amass $916,500 by 65. If instead he lowers his savings rate to 5% until his kids are out of college, bumps up to 15% at 55, and to 25% at 60, he’ll have $980,000 by the time he retires.

Don’t be shortsighted

When the going gets tough, CEOs who want to sound tough often impose across-the-board cuts. Yet be careful when trying to impose this tactic at home. If you’re looking to boost your cash flow through higher wages, for instance, cutting as much from your career development spending as from your vacation fund is counterproductive. Things like “continuing education and networking are worth the money,” says financial planner David Blaylock.
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Quick Changes For Quick Results

Thinking like a CEO means having the broad view and understanding the big picture of your whole financial life. But what if you need more cash, say, by the end of this month. What then?

These are a few tried and true ways to cut down on expenses here and there. When you really stick to these type of daily changes, the leftovers start to add up fast.

Review Your Budget

A good place to start is to review all of your current expenditures and create a budget – if you do not already have one. Then, once the budget is made, take a very close look at it and determine what things you can do without. Be sure to eliminate higher than necessary services – such as the most expensive cable TV, phone service, computer services, etc. It may even be possible to combine them at a reduced price. Be sure also to cut out some things no longer used, such as gym fees, and other memberships.

Your budget should also include set limits on each area of expenses. Staying within those limits will enable good financial management, but will still require some occasional adjustments. Using a cash flow sheet will help provide a better control on your cash management.

Use Coupons and Comparison Shop

Whenever you need to make a special purchase, be sure to take the time to get those special sales deals. Most stores and manufacturers follow a cycle of offering sales on particular items, possibly every six to eight weeks. By watching sales and coupons carefully, you can often find great deals on those things you need – and save money. Rebates on products are another excellent way to get discounts, and sometimes will even allow items to be obtained for free. Buying secondhand items is another way to increase those cash flows.

Pay More Than the Minimum Amount on Credit Bills

Anytime that you owe money on a credit card, or a loan, you are losing money in interest. Late fees, if you should pay late, are going to cost you more. Avoid late fees by paying on time, increase your credit score, and get better interest rates through refinancing. Always pay more than the minimum to be able to reduce bills faster and pay less in interest.
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What have you found to be the best strategy to increase your cash flow, in the short or long term? What are you saving for right now?

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